Intraday Market Thoughts

Awaiting BoE, ECB

by Kyle Morrison
Oct 6, 2011 9:08

Bank of England expected to hold, ECB seen following suit but may add liquidity measures, Swiss inflation expected to turn positive, US weekly jobless claims. US Crude longs hit targets, joining, USDCAD, gold and ES (S&P500 futures). See below for trades which are in progress.

Yesterdays disappointing downward revision to UK Q2 GDP to 0.1% has certainly strengthened the hand of habitual dove and MPC member Adam Posen's call for a further round of asset purchases.

Against that there is the fact that September services PMI confounded expectations, coming in above expectations at 52.9, as well as coming in above its European counterparts, and this will in all likelihood, keep the Bank on the sidelines for now.

Expectations amongst some economists that the Bank will alter the balance of vote is likely to be wide off the mark, especially in view of the arithmetic on the committee. Posen would need to win over at least four other members of the committee to his way of thinking, and that doesnt seem likely given recent data, though the publication of the minutes in two weeks time could well be illuminating.

Later on in the day Jean Claude Trichet will likely hold rates unchanged but could decide to extend the liquidity measures it has recently introduced and extend the term to around 12 months.

It will be the tone of his press conference that markets need to look for clues, which is where he may well prepare the ground for a rate cut in November. The subtext of what he says will be just as important and it will certainly be interesting to see if he maintains that monetary policy remains accommodative. ASHRAF WILL POST A NEW PREMIUM INTERMARKET INSIGHTS AHEAD of the 11:45 GMT decision.

US Crude longs hit targets, joining the PREMIUM TRADES in USDCAD, gold and ES (S&P500 futures). See EURUSD, EURGBP and DJA (Dow-30 futures) as they remain in progress, Free Trial here :

Swiss inflation is expected to come under scrutiny again today after last months sharply deflationary fall of 0.3% caused by the rise in the Swiss franc. The expectation is that prices in September will rise slightly by 0.1%, however the strong franc continues to be an issue with chatter this week continuing to plague the market about the SNB raising the peg further.

Yesterdays better than expected ADP numbers have raised expectations that the job market may be starting to pick up again, certainly last weeks weekly jobless claims were a pleasant surprise, dropping below 400k to 391k, however this weeks are likely to pick back up again with expectations of a rise back to 410k.



Latest IMTs